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NCPA’s Goodman Offers Strategic Medicare Solution

September 15, 2008

Plan Promotes Savings and Competition

Dallas (Sept.15, 2008) - Although federal agencies are warning of exploding Medicare costs, a new study says that with appropriate reforms, 50 years from now Medicare will cost no more than it does today as a percent of national income.

Published by the National Center for Policy Analysis, the reform plan relies on: (a) workers saving to pay for much of their own retirement medical expenses, (b) seniors managing more of their own health care dollars in special savings accounts and (c) new freedom for doctors and hospitals to find lower cost/higher quality methods of practicing medicine.

"Health care is the country's most serious domestic policy problem, and Medicare is the most important component of that problem," said NCPA President and study author John Goodman.

The Congressional Budget Office reports that overall health costs are now growing at twice the rate of national income. "It is a dangerous and unsustainable path," Goodman warned. "There is a solution, but we must act quickly to implement it."

The study advocates three reforms:

Workers and their employers would put aside four percent of payroll during their working years for post-retirement health care. As the accumulation grows over time, private funds will replace the taxpayer funds to finance Medicare spending.

The elderly would be encouraged to establish a special kind of Health Savings Account and pay for many expenses directly.

Doctors and hospitals would be free to repackage and reprice their services in order to reduce costs and increase the quality of care.

Goodman said that without reform, the size of the Medicare program will more than triple (relative to national income) over the next 75 years. To avert that outcome, Goodman said, "we need a new system under which each generation saves and invests and pays its own way."

"Reform is inevitable," he added. "The only question is how painful the reform will have to be. The more quickly we act, the easier will be the transition to a new system . "

This work/research was funded by the Ewing Marion Kauffman Foundation. The contents of this publication are solely the responsibility of the National Center for Policy Analysis.